If a permit is issued by the Inspector under the terms of this subchapter for the drilling and operation of a well, no actual drilling operations or site preparation work shall be commenced until the permittee shall file with the City Secretary a bond and certificate of insurance as follows.
(A) The bond shall be in the amount of no less than $100,000 and in a form acceptable to the city. A reliable insurance company authorized to do business as a surety in the State of Texas shall execute the bond. The bond shall be for the benefit of the city and all persons concerned, conditioned that the permittee will comply with the terms and conditions of this subchapter in the drilling and operation of the well. The bond shall become effective on or before the date the same is filed with the City Secretary and remain in force and effect and on deposit for at least a period of six months subsequent to the expiration of the term of the permit issued, and in addition the bond will be conditioned that the permittee will promptly pay off fines, penalties and other assessments imposed upon the permittee by reason of his or her breach of any of the terms, provisions and conditions of this subchapter, and that the permittee will promptly restore the streets and sidewalks and other public property of the city, which may be disturbed or damaged in the operations, to their former condition. The permittee will promptly clear all premises of all litter, trash, waste and other substances used, allowed or occurring in the drilling or producing operations, and will, after abandonment, grade, level and restore such property to the same surface condition, as nearly as possible, as existed when operations for the drilling of the wells were first commenced. The permittee will indemnify and hold the city harmless from any and all liability growing out of or attributable to the granting of the permit, including the payment of any expenses incurred by the city for any legal action which may be filed by either party hereto by reason of seeking or recovery of damages from the city. If at any time, the Inspector shall deem any permittee’s bond to be insufficient for any reason, they may require the permittee to make an additional bond. If, after completion of a well, the permittee has complied with all of the provisions of this subchapter, such as removing the derrick, clearing the premises and the like, they may apply to the Inspector to have the bond reduced to a sum of not less than $25,000 for the remainder of the time the well produces without reworking. During reworking operations, the amount of the bond shall be increased to the original amount. When the well or wells covered by the bond have been properly abandoned in conformity with all regulations of this subchapter, and in conformity with all regulations of the Commission and notice to that effect has been received by the city, or upon receipt of a satisfactory substitute, the irrevocable letter of credit or bond issued in compliance with these regulations shall be terminated and canceled.
(B) In addition to the bond required in division (A) of this section, the permittee shall carry a policy of standard comprehensive public liability insurance, including contractual liability covering bodily injuries and property damage, naming the permittee and the city as an additional insured, issued by an insurance company authorized to do business within the state, such policy in the aggregate shall provide for the following minimum coverages:
(1) Bodily injuries: $1,000,000, one person and $3,000,000, one accident;
(2) Property damage: $1,000,000; and
(3) Excess or umbrella liability: $5,000,000 excess, if the operator has a stand-alone environmental pollution liability (EPL) policy. Ten million dollars ($10,000,000) excess, if the operator does not have a stand-alone EPL policy. Coverage must include an endorsement for sudden or accidental pollution. If seepage and pollution coverage is written on a “claims made” basis, the operator must maintain continuous coverage and purchase extended coverage period insurance when necessary.
(C) Environmental pollution liability coverage.
(1) Operator shall purchase and maintain in force for the duration of the oil, gas, combined well permit, insurance for environmental pollution liability applicable to bodily injury, property damage, including loss of use of damaged property or of property that has not been physically injured or destroyed; clean up costs; and defense, including costs and expenses incurred in the investigation, defense or settlement of claims; all in connection with a loss arising from the insured site.
(2) Coverage shall be maintained in an amount of at least $1,000,000 per loss, with an annual aggregate of at least $10,000,000.
(3) Coverage shall apply to sudden and accidental pollution conditions resulting from the escape or release of smoke, vapors, fumes, acids, alkalis, toxic chemicals, liquids or gases, waste material or other irritants, contaminants or pollutants.
(4) The operator shall maintain continuous coverage and shall purchase extended coverage period insurance when necessary. The extended coverage period insurance must provide that any retroactive date applicable to coverage under the policy precedes the effective date of the issuance of the permit by the city.
(D) The permittee shall file with the City Secretary certificates of such insurance coverage as stated in division (A) of this section, and shall obtain the written approval thereof by the City Secretary, who shall act thereon within ten days from the date of such tiling. Such insurance policy shall not be cancelled without written notice to the City Secretary at least 30 days prior to the effective date of such cancellation. If the insurance policy is cancelled, the permit granted shall terminate, and the permittee’s rights to operate under the permit shall cease until the permittee files additional insurance as provided in this section. If after completion of a well, permittee has complied with all provisions of this subchapter, such as removing dirt, put up fencing, clearing the premises and the like, the permittee may apply to the Inspector to have the insurance policies reduced as followed:
(1) Bodily injuries: $250,000, one person and $500,000, one accident; and
(2) Property damage: $250,000.
(E) The City Council may elect to make an exception to the requirements of this section when in their opinion the intent and purpose for the requirements of the bond and insurance can be assured by any of the following means:
(1) Acceptance of a guaranty of indemnity to the city in lieu of bond and a plan of self insurance in the case of financially responsible operators;
(2) Acceptance of a blanket bond and a single policy of insurance to cover all operations of the permittee within the city limits; or
(3) Application of bond and insurance requirements acceptable to the City Council.
(F) Whenever the oil and gas inspector finds that a default has occurred in the performance of any requirement or condition imposed by this subchapter, a written notice shall be given to the operator. Such notice shall specify the work to be done, the estimated cost and the period of time deemed by the Inspector to be reasonably necessary for the completion of such work. After receipt of such notice, the operator shall, within the time therein specified, either cause or require the work to be performed, or failing to do so, shall pay over to the city 125% of the estimated cost of doing the work as set forth in the notice. In no event, however, shall the cure period be less than thirty 30 days unless the failure presents a risk or imminent destruction of property or injury to persons or unless the failure involves the operator’s failure to provide periodic reports as required by this subchapter. The city shall be authorized to draw against any bond to recover such amount due from the operator. Upon receipt of such monies, the city shall proceed by such mode as deemed convenient to cause the required work to be performed and completed, but no liability shall be incurred other than for the expenditure of the sum in hand. In the event that the well has not been properly abandoned under the regulations of the Commission, such additional money may be demanded from the operator as is necessary to properly plug and abandon the well and restore the drill site in conformity with the regulations of this subchapter.
(Ord. 106, passed 2-19-1980; Am. Ord. 2010-007, passed 7-20-2010)